Angola is the Latest Victim of China’s ‘Financial Aid’ Trap

China has turned her attention to Oil and Diamond rich Angola, offering a foreign aid of $2 billion loan despite Angola’s outstanding $23 million. Should we be worried for this Oil and Diamond rich country?

Angola has secured $2 billion in Chinese financing from the China Development Bank for infrastructure projects on President João Lourenço’s first visit to Beijing, Angola’s state newspaper Jornal de Angola reported today. As usual, details of the terms of the financing were not released.

The agreement was signed by the Angolan Finance Ministry and the Chinese Development Bank, in the ambit of the visit of the state visit of President João Lourenço to the Asian country, which is to end today.

Angola, Africa’s second largest oil producer, is in the process of trying to diversify its economy since a fall in the price of crude in 2014 plunged it into recession. Inflation is running at more than 20% a year and at least one in five of working age is jobless.

Lourenço, who took power a year ago after the 38-year rule of José Eduardo dos Santos, has promised to oversee an “economic miracle” by opening up the country to foreign investment and prioritizing sectors such as agriculture and tourism. So far growth has remained sluggish.

Investors are increasingly concerned by Angola’s growing debt burden, which the government said earlier this year will rise to $77.3bn, or 70.8% of GDP, by the end of 2018. Of that, about $21.5bn was already owed to China before Lourenço’s visit.

China, deemed the main financier of Angolan infrastructures, granted its first credit line to Angola in 2002.

According to official data, Angola’s debt to China is currently of about USD 23 million.

The Angolan Head of State, João Lourenço, is ending this Wednesday his state visit to China, after holding top level contacts with the Chinese political authorities and entrepreneurs, which culminated with the signing of several co-operation agreements.

President João Lourenço is due back in the country on Thursday.

Angola is Africa’s second largest oil producer and is the third-largest producer of diamonds in Africa. It is rich in many other minerals like manganese, copper, gold, phosphates, granite, marble, uranium, quartz, lead, zinc, wolfram, tin, fluorite, sulfur, feldspar, kaolin, mica, asphalt, gypsum, and talc. Could this be the reason why China is interested in this country?